Understand your payments before buying land.
When purchasing farmland, it’s important to consider not just the cost of the parcel of land itself but also the interest rate. It’s not easy to time the market, but farmers should look to purchase or refinance when mortgage rates are low. Locking in a low mortgage interest rate will result in a lower monthly mortgage payment and less interest to the mortgage lender.
While a 1% difference may sound insignificant, it can add up in the long run.
To forecast whether mortgage rates are going down, we need to first understand how they are determined.
There is no single governing body or institution that determines mortgage interest rates. Rather, mortgage rates are impacted by a number of factors related to both the economic market and the unique purchaser.
The economic factors that can impact mortgage interest rates include:
Federal funds rate
Bond market
Property market
The factors unique to the purchaser that can impact mortgage interest rates include:
Credit score
Other outstanding debts
Down payment amount on this property
Loan type
Geographic location
These are not exhaustive lists of factors that influence rates, but, in general, staying up-to-date on the economy and on your unique personal financial status can help you forecast possible mortgage rate fluctuations. It is best to speak with a loan adviser to understand current market conditions and the unique opportunities you bring to the table.
Have questions about land loans? FBN® Finance has ag loan advisors across rural communities who have experience helping ag professionals finance their operations. "These advisors have earned the trust and repeat business of thousands of farms across the U.S," says Dan English, general manager, FBN Finance.
Fill out a form here to speak to an FBN Finance loan adviser or call 866-619-3080.
The housing shortage is driving costs up in the commercial real estate market. Although there is not a farmland shortage currently, some experts are concerned about diminishing acres of agricultural land.
We’re currently losing around 0.2% of agricultural land a year due to development. That’s about 1.8 million acres of ag land lost per year since 2015.
As valuable ag land becomes more scarce, expect farmland property prices and mortgage interest rates to rise.
Many experts have quipped that the best time to have bought property was yesterday but that the second-best is today.
“The short-term fluctuations in interest rates, while important, are often weighed against the long-term potential for income generation and capital appreciation,” says Michael Lauher, a farm manager.
Lauher explains that even when there are high interest rates, farmland holds value because of its potential for profitability. During inflation, crop and livestock prices tend to increase, thereby helping farmers come out profitable even when interest rates are high.
“People sometimes refer to farmland as an investment in gold, plus a coupon,” says Bruce Sherrick, professor at the University of Illinois.
There are many benefits to owning a farm, and investing in farmland can help ag operations scale and become more profitable.
When it comes to current land value and mortgage rates, it could be prudent to invest now before land becomes more expensive and mortgage interest rates go up. However, it’s a personal decision with many factors to consider.
The farmland loans team at FBN Finance can discuss financing solutions with you for your ag operation.
Click here to contact the FBN Finance team.
Time is money when it comes to securing land financing for your ag operation. Being proactive can help you capitalize on current mortgage interest rates and invest in ag property that can stay in your generations for years to come.
Unlike other lenders that force you to wait for a farmland loan application decision, FBN Finance approves land loans for up to $2.5 million* within minutes for qualified applicants.
Click here to apply for a farmland loan.
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*Approval is conditional and subject to the product’s terms and conditions, and underwriting.
Financing offered by FBN Finance, LLC and its lending partners. Terms and conditions apply. To qualify, a borrower must be a member of Farmer’s Business Network, Inc. and meet all underwriting requirements. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify.
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